On November 17, 2015, Pomerantz LLP was appointed Co-Lead Counsel in the class action lawsuit against CaesarStone Sdot-Yam Ltd. (“CaesarStone” or the “Company”) and certain of its officers. The class action, filed in the United States District Court, Southern District of New York, and docketed under 15-cv-06726, is on behalf of a class consisting of all persons or entities who purchased CaesarStone securities between March 25, 2013 and August 18, 2015 inclusive (the “Class Period”). This class action seeks to recover damages against CaesarStone for alleged violations of the federal securities laws under the Securities Exchange Act of 1934.
CaesarStone manufactures and sells engineered quartz surfaces under the CaesarStone brand in the United States, Australia, Canada, Israel, Europe, and internationally. The Company’s products are engineered quartz slabs, which are used as kitchen countertops in renovation and remodeling, and residential construction end markets, as well as other applications, including vanity tops, wall panels, back splashes, floor tiles, stair, and other interior surfaces that are used in various residential and non-residential applications. CaesarStone sells its products directly to fabricators, sub-distributors, and resellers; and indirectly through a network of independent distributors.
The complaint alleges that throughout the Class Period, CaesarStone made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, CaesarStone made false and/or misleading statements and/or failed to disclose that: (i) that the cost of quartz rose substantially byapproximately 20% in 2014 while the Company claimed in SEC filings the impact of the price increase was just 4%; (ii) independent lab tests demonstrate that CaesarStone’s samples contained less quartz than advertised; (iii) CaesarStone’s reported consolidated margins, gross margins, and EBITDA were overstated; (iv) the extent of and risk posed by a growing number of lawsuits for approximately 60 silicosis-related injuries or deaths suffered by workers and fabricators of its product in Israel was understated; (v) the impact recent OSHA warnings regarding silicosis would have on the opening of a new U.S. facility and associated costs; (vi) recent inspection reports revealed audit deficiencies related to revenue and inventory controls; and (vii) as a result of the foregoing, CaesarStone's statements about its business, operations, and prospects were false and misleading and/or lacked a reasonable basis at all relevant times.
On August 19, 2015, analyst firm Spruce Point Capital Management published a report on CaesarStone describing the aforementioned false and misleading statements and failures of disclosure. On this adverse news, CaesarStone ADRs fell $3.68, or 7.6%, to close at $44.61 on August 19, 2015.